With many of the nation's largest stocks sitting around their highest levels since the Global Financial Crisis, more and more bargains are now being found at the smaller end of the market. While these stocks often don't offer the same level of safety as their larger counterparts, they can offer far greater upside potential.
If I had $10,000 to invest today, here are five stocks that I would buy (or top up on) first.
- Nearmap Ltd (ASX: NEA), a provider of ultra-high resolution aerial photographs, would be my first pick. I purchased shares in the company almost one month ago and already my stake has appreciated in value by 19.2%, but I firmly believe its best days are still ahead of it… To begin with, its products are proving to be incredibly useful across various industries, it recently signed a strategic partnership with Google Inc and it has an incredible opportunity to expand further into the US.
- Slater & Gordon Limited (ASX: SGH), the law firm famous for once hiring ex-Prime Minister Julia Gillard, is another solid bet for your money. The company is a leader in Personal Injury (PI) cases in Australia and while it is extending its practices here, it is also expanding into the United Kingdom. While the stock trades on a P/E ratio of 19.9, reasonable growth is anticipated in the coming years which justifies its valuation.
- Veda Group Ltd (ASX: VED) has risen strongly over the last month or so with the market finally starting to appreciate the business' future growth prospects. Veda should continue to benefit from the low interest rate environment and strong credit growth, as well as the introduction of the Comprehensive Credit Reporting regime. In addition, it just announced a 4 cent per share dividend, which is twice the amount some were expecting.
- Cover-More Group Ltd (ASX: CVO) is Australia's leading travel insurance business which debuted on the ASX late last year. While its shares have experienced some turbulence in that time, its recent full-year results highlighted that business is still performing strongly with its earnings and dividend both coming in far ahead of prospectus forecasts. This is a business to hold for the long term.
- While most investors would head straight for Telstra Corporation Ltd (ASX: TLS) for exposure to Australia's telecommunications industry and a fat, fully franked dividend, M2 Group Ltd (ASX: MTU) is a solid alternative. It boasts an enormous customer base thanks to its acquisitions of businesses such as Dodo and Primus and will look to continue growing organically over the coming years. It has upped its fully franked dividend to 26 cents per share, giving it a grossed up yield of 5.1%.
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While I currently own Nearmap and Veda Group, each of the others are sitting firmly on my watchlist and could be amongst my next targets.
